Spanish stocks sank and its borrowing costs rose Friday after the government released data showing the country's banks borrowed a record €316.3 billion ($415.9 billion) from the European Central Bank in March.

Bank of Spain data showed that ECB lending to the country's financial institutions almost doubled since February when their reliance was €169.8 billion ($223.3 billion).

Concern is mounting over Spain's ability to cut its national debt and lift its struggling economy out of recession when unemployment is nearing 23 percent.

The ECB made some €1 trillion in emergency three-year loans to banks in two batches in Dec. and Feb., lifelines to Spain's troubled banks that find it hard to secure short-term financing elsewhere.

The injection spurred lenders to snap up battered government debt, driving Spanish borrowing costs down. However, the effects of the cheap loans across Europe have since dissipated and Spain is taking the brunt of market distrust.

Some of that distrust is misplaced, said analyst Manuel Escudero, who added that much of Spain's industrial sector appeared to be riding the crisis instead of heading to a major downturn in output.

"I see much of Spain's industrial sector beginning to internationalize instead of heading toward stagnation, it has slimmed down and is looking reasonably muscular," said Escudero who heads Deusto University business school in the northern Basque region.

Klaas Knot, a member of the European Central Bank's governing council, also said he did not see a need for the ECB to engage in buying up Spanish bonds or launch a third program of low-rate loans to European banks to steady markets.

Knot, said last week's spike in the interest rate of Spanish government bonds was due to "awkward communication" by its government about its plans for budget cuts.

To boost confidence in its finances, the government last month unveiled an austerity budget with €27 billion ($35.5 billion) in tax hikes and spending cuts this year.

Spain is expected to enter its second recession in three years this quarter, with the country's central bank forecasting its economy will contract 1.7 percent this year.

The Ibex 35 stock index in Madrid was down 3.6 percent at close of trading Friday and 10-year government yields rose 0.2 percent to 5.93, according to FactSet.

Just five years ago Spain was one of Europe's most buoyant economies, but a nose-dive started in 2008 when the international financial crisis coincided with the bursting of a real estate bubble that had buoyed the economy for over a decade.

The government ordered banks to strengthen capital levels to cover exposure to bad real estate debt. Investors fear that sustained bank weakness, coupled with rising public debt and high funding costs could force Spain to apply for European aid.


Associated Press writer Toby Sterling in Amsterdam contributed to this report.